Final Curtain Falls on UNE-P

MARCH 11, 2006, IS THE

day UNE-P lease rates become mere footnotes to the Telecommunications Act of 1996. The day has been anticipated for a few years and been part of the official record since the FCCs ruling in December 2004.

Because of this long lead time, the deadline is a non-event in the industry, says Steve Davis, senior vice president of public policy at Qwest Communications International Inc.

I dont see the transition date as being very material, Davis adds. The first of Qwests agreements was signed a yearand- a-half ago with MCI Inc. [now part of Verizon Communications Inc.] Qwest has transitioned 95 percent of its CLEC customers onto separate arrangements such as Qwest Platform Plus, the carriers alternative to UNE-P, he says, calling the negotiations very positive.

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Kristen Shore, BellSouth Corp.s director of CLEC negotiations, also says the March 11 changeover is turning out to be just another day. BellSouth has wrapped up most of its CLEC talks and most people have known where they were going for a long time, she says. Although she doesnt know the exact number, Shore says BellSouth has switched the majority of its UNE-P customers to other billing agreements.

Stragglers will have to sign new documents soon, or switch to business models that rely on VoIP, third-party providers or facilities, to avoid paying higher lease rates.

Similarly, AT&T Inc., formerly SBC Communications Inc., has moved more than 90 percent of its lines off UNE-P and onto other pricing structures and the company is working to obtain agreements on the remaining 10 percent, says spokesman Michael Balmoris.

Verizon didnt respond to requests for comment, but the phone company told PHONE+ in an interview last fall it had completed commercial agreements with more than 120 providers for its commercial dial tone platform, Advantage. This figure represents more than 90 percent of its former UNE-P lines.

The Bells assertions that they have transferred the majority of their agreements with competitive carriers to commercial deals dont surprise Jason Oxman, senior vice president of legal and international affairs for competitive industry association COMPTEL. Because the RBOCs require the arrangements to be kept confidential, Oxman and others can only speculate as to the nature, and results, of the negotiations. AT&T and MCI together made up the vast majority of the nations UNE-P lines, he says. So the migration has gone, from the Bells perspective, quite smoothly.

Oxman adds all of COMPTELs members have tried to work out favorable commercial agreements with the Bell companies, and some have been successful. But, he adds, we dont know a lot about whats happening. … We have heard from members that have had a great deal of difficulty in negotiating.

For COMPTEL and its members, Oxman says, March 11 and the end of UNE-P is the best evidence of the success the Bells have had in squelching local competition. In his view, AT&T and MCI the two largest local carriers could not compete as standalone companies in a world without regulated UNE-P pricing, and he predicts the same ill fate will befall competitors in the broadband industry, now that the FCC has deregulated DSL services.

One of the COMPTEL members that has signed new commercial agreements with the RBOCs is Lightyear Network Solutions LLC. We are in that game as big and as fast as we can be, says J. Sherman Henderson, president and CEO of Lightyear and chairman of COMPTEL. To be in this business, you have to provide local service; thats the story. The challenge now, he adds, is to find alternative ways to provide local service to residents and businesses. However, he says his company has no plans to wean itself from its commercial agreements, which he says in certain geographies are invaluable.

Even though March 11 is likely to pass with little fanfare, the end of UNE-P pricing will land many former UNE-P resellers into yet another regulatory scrap. This time it will be over regulation of IP-based facilities they deploy to support customers that previously used resold UNE-P lines. As policymakers pursue another telecom rewrite, they will have to consider the impact of IP services, which did not exist 10 years ago, and determine how those technologies fit into Universal Service Fund payments, intercarrier compensation rules, Homeland Security, E911 requirements and more.

AT&T Inc.
BellSouth Corp.
Lightyear Network Solutions LLC
Qwest Communications International Inc.
Verizon Communications Inc.

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